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The shift towards taxes easiest to collect and the impact on technology

Today’s rapidly changing tax, regulatory and business landscape is intensified by technological disruption and increased public scrutiny, and the impact on the business world is profound.

In the world of tax, these trends manifest in different, but equally disruptive ways, including heightened emphasis on data analytics, technology and digital transformation, and generally, a global shift amongst tax authorities in regards to complex corporate taxation collection, with countries generally shifting to prioritize easier-to-collect taxes, leveraging technology. This shift marks a new paradigm for tax leaders worldwide.

“In terms of statutory corporate tax rates, the sky has literally been falling for 3 decades; and the pace at which they are falling is significant,” said Tim Gillis, Global Head of Tax Technology and Innovation at KPMG International on stage at a recent tax technology event held in Hong Kong. He traced the shift back to 2000, when 21 countries had corporate income tax rates that were in excess of 30 percent.2

At the time Tim was speaking, only five countries had corporate tax rates in excess of 30 percent, and with the implementation of US Tax Reform, there are now only four. “When I was in law school in the late 80s, the average rate was 43 percent amongst the OECD countries,” said Tim. “That rate has now declined to 24 percent, which leads me to believe that I have seen the high water mark for corporate income tax in my lifetime.”3

What does this shift have to do with technology and the transformation of the modern tax function?

In 2016, the OECD released five publications dealing with technology in the tax administration function, bearing titles like Tax Technologies for Better Tax Administrations, and providing data maturity models to help tax administrators evolve from basic to advanced in their use and deployment of technologies. From these publications, and the resulting policy shifts seen in certain major tax administrations since that time, it is clear that tax authorities are proactively embracing the power and potential of technology and analytics at many levels. The likely result is that tax administration and tax policy in the 21st century will be fundamentally shaped by how easy a tax is for authorities to collect and administer through technology.

In this context, for the tax function of multinational organizations, technology and innovation is increasingly the difference between a corporate tax function that is on the defensive, one that is simply keeping pace, and one that is proactively building a proud tax narrative — adding value inside and outside of the organization.

Regardless of where a tax function stands today in its technological evolution, there is pressure and opportunity to go further, and technology can help.

Questions to consider

— As this shift continues, how will your tax leaders adapt? — Is your organization prepared to adopt new technology designed to transform the tax function? — How will the increase in technology disruption impact your specific role?

KPMG International Cooperative (“KPMG International”) is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.